Is Access to Capital Getting Better for Founders?

Below is an excerpt on how to create diversity in entrepreneurship from Beyond Diversity: 12 Non-Obvious Ways to Build a More Inclusive World, a new book out by Jennifer Brown and Rohit Bhargava.

People from marginalized groups have often started their own ventures as a response to workplace discrimination, but these entrepreneurs frequently lack adequate funding or access to support networks. Making entrepreneurship more inclusive will require increased access to capital, active local support networks and well-funded accelerator programs.

This shift offers us the ideal topic to begin exploring how entrepreneurship is changing: access to funding. To better understand this topic, let’s go behind the scenes with one of the voices working to make venture capital funding more widely available.

Ever since his parents bought him a Commodore 64 computer, Marlon Nichols showed a burgeoning interest in technology. His father worked as a train engineer in Jamaica before the family moved to New York, where his mother worked as a housekeeper until she got a beautician license and opened her own shop. From a young age, Marlon witnessed firsthand the value of ambition, hard work, and entrepreneurship. That upbringing led him to become the first member of his family to attend college, and eventually to focus his work on empowering and financing underinvested communities. Today Nichols is a founding managing partner of MaC Venture Capital, a seed-stage venture capital firm that made headlines for raising $110 million in March of 2021—one of the largest first-time fundraises by a majority Black-owned venture firm. With 81 percent of their portfolio of companies having Black, Latinx, or women founders, Marlon and his fellow general partners are shifting the landscape of venture funding to make it more accessible to underrepresented founders.

They are not alone. While traditional financial institutions continue to underinvest in trailblazing leaders that come from diverse backgrounds, there are a growing number of new initiatives aimed at tackling this inequity. The W Fund, for example, is an investment firm focusing on fueling the startup ecosystem, aggregating capital, and deploying funds to women and startups that are driving the future of tech.

The nonprofit BLCK VC equips Black investors with the access, education, and community they need to accelerate their careers in venture capital. Vancouver-based Raven Indigenous Capital Partners provides impact investing to improve outcomes in Indigenous communities.

The larger venture capital community is also starting to make this a priority. In the UK, a nonprofit organization called Diversity VC created a new certification standard for the industry to measure which VC firms are actively investing in diverse founders and bringing in diverse talent. Alongside industry-wide standards, large venture capital firms like Intel Capital, Khosla Ventures and Kleiner Perkins are announcing their own initiatives to seek out underrepresented founders.

Of course, funding is just the start. To encourage more diversity in entrepreneurship, we must support a growing arsenal of recommended networks, government-funded support systems, co-working spaces, and mentorship opportunities as well. In researching this book, we examined a range of accelerator programs, networking groups, and mentoring communities. These groups are now funding grants and education programs that are so varied and numerous that we catalogued all of them— segmented by identity, industry, and geography—and published the list as an online resource.

What needs to happen

Encouraging and empowering more diversity in entrepreneurship will require a combination of both public and private initiatives focused on the dual challenge of providing access to capital and building the support networks, funding groups, educational opportunities and more that enable a steady flow of successful businesses to emerge, rather than an occasional success story. Through a combination of insights gathered from our summit, we put together a roadmap that shows what it will take to make meaningful change happen.

Imperative #1: The broader investment community must ensure teams making funding decisions are diverse and inclusive.

In situations where investors fail to make significant bets on diverse startup founders, it can be a problem of unconscious bias. Research has shown that the venture investing teams most likely to fund diverse founders tend to be diverse themselves. Investing teams comprising more than one gender are 2 times more likely to invest in gender diverse founding teams, for example, 2.6 times more likely to invest in women-led entrepreneur teams, and over 3 times more likely to invest in a female CEO.12

Alternatively, studies have shown that homogenous teams suffer, limiting their potential as businesses: venture capital teams with shared ethnicity have 5.8 percent lower success rates, and those with shared educational backgrounds have 11.5 percent lower success rates. Although inclusive leadership teams within the financial community won’t solve discriminatory funding practices entirely, it is a practical and impactful way of improving the odds that capital gets into the capable hands of communities who have been historically deprived of it in the past.

Imperative #2: Networks for aspiring entrepreneurs must be created to help address systemic barriers to success.

The K’é Main Street Learning Lab in Mesa, Arizona is a small business incubator space founded with the mission of highlighting the leadership that exists within business leaders in marginalized groups who are rarely visible to the broader business community. As co-founder and business coach Pamela Slim says, it was necessary because “despite mountains of evidence about the benefits of diversity, and decades of advocacy for inclusive and equitable startup spaces, most incubator programs were dominated by White males.”

For the past several years, K’é (named for a Diné word meaning “system of kinship”) has provided a home for hundreds of startup leaders of color looking for an inclusive space to teach and mentor their community to get their business ideas off the ground. Organizations like this offer resources, support, and guidance to entrepreneurs in local communities around the world.

Networks like the Learning Lab are crucial to future successes and are always a core part of any city-wide revitalization effort around the world. Each of these is the equivalent of planting seeds in a professional field. The regions that do invest in these types of programs are likely to not only create more economic prosperity locally, but also attract more diverse talent to the area.

Imperative #3: Diversity must be reframed as a competitive advantage rather than a barrier to overcome.

Travis Holoway is the co-founder and CEO of SoLo Funds, a mobile platform that provides more affordable access to loans. As a Black entrepreneur, he’s all too familiar with the struggle to get ahead in the face of systemic barriers. “It’s been tough, and we constantly have this feeling of being a little bit underestimated and undervalued,” Holoway describes. “But on the flip side, it’s actually made us stronger as a company. At the end of the day, when we finally get to the point of raising the capital, we’re typically a more structurally sound business.”

Entrepreneur, investor, and co-founder of Tech.co, Established and Established Ventures, Frank Gruber shares a similar perspective: “If you can find the strength in your background, it can become a superpower.” By focusing on the positive, entrepreneurs in all industry sectors can find a unique way to stand apart.

If entire industries can start to see this “superpower” in business people from varied backgrounds, diverse entrepreneurs can more easily overcome any initial rejections and find a home for their business ideas to succeed.



The Switch Editorial Team.

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